Ever since 2006 when it was labelled word of the year by the New Oxford American Dictionary, "carbon neutral" has been the word on everyone’s lips . But what does carbon neutral actually mean?

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The whole point about carbon neutrality is about achieving zero overall greenhouse gas emissions either though buying carbon offsets such as GreenPower or to offset your electricity use.

You can also offset carbon by doing somethingto reduce your emissions to zero – such as installing enough photovoltaic panels so that you don’t need any extra electricity from the grid as well as accounting for raw material extraction and manufacture of the panels.

So how do carbon offsets work?
The theory is a third party is paid to reduce greenhouse gas emissions on your behalf. This can be done in one of four main ways:

tree planting
Tree planting is very popular, but is also contentious because it’s considered very temporary – once the tree dies the carbon is released back into the atmosphere. Another problem is that there's rarely a system to check that the trees actually grow.

methane combustion
Collecting methane from landfill is also contentious because even though burning methane creates carbon dioxide, which reduces the global warming potential of the gas by 25 times, it is still releasing carbon dioxide into the atmosphere without utilising the energy from combustion.

renewable energy systems
Less contentious are emission reduction projects such as renewable energy systems including wind or solar electricity generation, or energy efficiency projects such as installing energy efficient light bulbs in homes.

energy efficiency projects
The benefit of emission reduction programs is they avoid greenhouse gas emissions at source rather than trying to mop them up as with tree planting programs.

So how do you choose an offset scheme?
It is complicated – you want to want to be sure that there is no double counting, that projects are externally audited and that there is transparency regarding what types of projects your offsets will support. Most importantly do the projects meet the ‘additionality’ criteria – meaning would the project have gone ahead without the support of carbon offsets ?

Then there is the problem that there is no consistent way to measure offsets. For example when comparing the emissions from a return flight from Sydney to New York, figures vary from 8.65 tonnes up to 10.88 tonnes. The cost also varies – for example this same return flight would cost between $129.75 and $240.65 depending on whom you offset your flight with.

For more a more stringent standard there is also the international CDM Gold Standard, which only accepts projects that result in emission reduction and also promise sustainable development for local communities. Independently verified, it is run by a Swiss not-for-profit foundation and is supported by 51 not-for-profit organisations including WWF.

For a good overview of offset programs in Australia, look at the Carbon Offset Guide developed by RMIT in conjunction with the Victorian EPA.